The United States Sports Insurance Company (USSIC) was incorporated in 1988 as a wholly owned subsidiary of the entity now known popularly as USA Swimming. The decision to start USSIC makes for an appropriate prologue for the work today of Congressman George Miller and his staff at the House Committee on Education and the Workforce, who are investigating USA Swimming’s failed “safe sport” program — even as the organization’s PR flacks and lobbyists work furiously to shore up “perceptions.”

In ‘88, swimming faced the prospect of skyrocketing insurance costs. The organization’s main carrier, AIG, complained that premiums were too low in multiple areas of liability, including sex abuse. Given the exposures, AIG would only discuss premiums in the range of $1 million, up from about $200,000, for the same coverage.

During that period, large corporations, profit and non-profit alike, faced steep premium hikes. What emerged from the creativity of that generation’s lawyers and MBA’s was a new wrinkle called “captive reinsurance.” In a nutshell, parent entities, with smart leveraging of tax breaks and regulatory gimmicks, could save money by insuring themselves, managing the claims themselves, or underwriting the risks of their third-party commercial carriers.

Today many corporations have some type of captive. (Yep, the Catholic Church has one: it’s called the National Catholic Risk Retention Group, Inc.) In 1988, the U.S. Olympic Committee already had its own captive covering several sports, called PANOL. But USOC wanted no more part of underwriting swimming’s risks than AIG did at the established premiums. While other national governing bodies, or NGB’s, saw their premiums reduced or coverage stable, USA Swimming was not allowed to join due to its risks and failure to manage them. So swimming researched forming its own captive.

In the late 1980s, Caribbean countries competed furiously to be the preferred home of captive reinsurers from the States. For USSIC, USA Swimming chose Barbados, which offered many years of tax abatement, as well as a structure so loose that all the operation really required was a dummy bank account and a set of books domiciled on the island, plus the periodic on-site board of directors meeting. (These seaside soirees could easily be justified as perk-laden bacchanals — as we will explain in a future installment.)

A lot of companies preferred to locate their captives in other Caribbean countries — the Cayman Islands was a popular destination. But for USA Swimming, the clincher was that Barbados had a tax treaty with Canada — but not the U.S. The less exposure to U.S. laws and their pesky inspectors and enforcers, the better.

Recently, offshore captives have fallen somewhat out of favor as internal American states — notably Vermont, North Carolina, and Hawaii — rejiggered state laws and regulations to emerge as equally friendly havens. “USA” Swimming, however, never seems to have considered returning its insurance operations to the U S of A. The main reason, experts believe, is that swimming’s lords of the rings do not want records of their reinsurance machinations open to public inspection here. As a subsidiary of the non-profit USA Swimming, USSIC is included in Internal Revenue Service filings. But let’s not get carried away and let every Tom, Dick, and Harry read all the details of how our NGB works so assiduously to protect its own institutional derriere — while not lifting a finger to reach out and offer support to the victims of sexual abuse in their ranks.

Stay with us for more on the ice-cold tactics of swimming’s insurers in warm and sunny Barbados. Our next stories will deal with such topics as:

* USOC’s 1999 warning to swimming that it couldn’t use the parent organization’s Colorado Springs training facility, because USA Swimming was the only NGB whose insurance didn’t cover the exposure of their clubs.

* The consultant’s actuarial study that concluded that sexual abuse claims were a ticking time bomb for swimming — a view shared by, among others, Jack Swarbrick, now the athletic director at football player rape-rife Notre Dame.

* The imperial ambitions for USSIC of Dale Neuburger, USA Swimming’s board president from 1996 to 2004.

* How the case of Simon Chocron — a pedophile coach at the famous Bowles Club in Jacksonville, Florida, who is now an international fugitive from justice — helped blow apart swimming’s multilayered defenses in abuse civil lawsuits.